Thursday, June 3, 2010

Banks have different type of products for the different needs of customers. A customer can choose from the wide range of products that bank offer under the umbrella of Home Loans n Mortgage loans.

Banks will treat the loans differently and have different terms and conditions to each product. For the convenience of our customers and for better understanding we are listing below the products that usually all banks offer to all the customers who wants to go for a Home or Mortgage Loan.

New Purchase: It’s the product which is suitable for those customers who wants to buy a Flat or Independent House or Villa from a builder of a Individual person. The property should be a newly constructed one of 0 years age. The disbursement percentage under this category of products will be 85% of the property cost including the stamp duty and registration cost or the sanctioned amount of the agreement amount whichever is less. Disbursement of loan will be done in one single shot if the property is in ready to occupy position. If the property is under construction at the time of loan processing the loan will be disbursed in parts depending on the construction stage. Banks will not charge EMI until and unless the loan is completely disbursed. Banks will charge only the Pre – EMI (Interest on the loan amount disbursed) during the construction stage. The Pre EMI’s paid to the bank will not come into consideration of customer’s repayment period but will have Tax Exemption on it.

Resale Purchase: This product is suitable to those customers who want to buy a property from a person who already owns it. The property may be a Flat or Independent House or Villa of any years of age. But usually banks don’t fund to those properties which are above 25 years of age. Banks will make property evaluation and take depreciation 2% per year over the property. The funding will be done in one single shot up to a maximum of 85% of the property cost or the Technical Value or the Sanction amount whichever is less. Tax exemption is applicable to this loan.

Resale Purchase (Vendor Liability): It is the similar product as the Resale but the only difference that it has is the seller will have a loan on the property in other bank and wants the customer to take over that loan. In this case banks will disburse the loan to the amount of outstanding that the seller is having in his bank and will release the balance funds after receiving the documents from the vendor’s bank. The products will have Tax exemption benefits.

Plot Purchase: A person who wants to buy an open land can opt for this product. The purchase of plot can be from a builder or developer or from an Individual person. Under this product category banks will fund up to a maximum of 75% of the property cost including the stamp duty and registration cost or the sanctioned amount of the agreement amount whichever is less. The plot must have approved layout from the competent authority. Customers have to pay 2% - 4% of the outstanding amount as the pre-closing charges if he/she wants to pre-close the loan between the tenure. Tax exemption is not applicable to this loan.

Construction Loan: This product is suitable to those customers who already owns a plot and wants to do construction on that plot. Banks will fund 100% of the construction cost on the basis of the abstract and detailed estimations submitted, but the disbursement will be in parts depending on the stage of construction. The plot must have approved layout from the competent authority. Tax exemption is applicable to this loan.

Enhancement: This product is applicable to those applicants only who have availed a construction loan from the bank before and which is not completely disbursed. It is just another construction loan from the bank.

Balance Transfer (BT): One who wants to transfer their loan from one bank to another for better benefits can choose this product. Banks will fund up to a maximum of 85% of the property cost or the sanctioned amount whichever is less. The property should have all the required approvals from the competent authorities. Tax exemption is applicable to this loan. Customers have to pay 2% - 4% of the outstanding principle towards the pre-closing charges of the loan.

Top Up: This is the product which is applicable to the existing customers of any bank. Customer can ask the bank for funds for his personal or official needs. Banks will fund up to a maximum of 85% of the property cost by taking the prior loan into consideration. If the funding percentage crosses 85% of the total property cost then banks will not provide any top up facility to the customers.

Commercial Purchase: Customers who wants to buy a property which is meant for commercial purpose can opt for this product. Banks will fund up to a maximum of 75% of the property cost including the stamp duty and the registration costs or the sanctioned amount or the agreement amount whichever is less. The property should have commercial approval for the construction from the competent authority. Tax exemption is not applicable to this loan.
Commercial Mortgage: Customers who wants to mortgage commercially used Flat or Shop or house for availing funds for his official or personal needs can go for this product. Banks will fund up to a maximum of 60% of the property cost or the sanctioned amount whichever is less. Maximum tenure for this product is 10 years and Tax exemption is not applicable to this loan.
Residential Mortgage: This product is applicable to those applicants who wants to mortgage their residential property and wants to avail funds. Only Flats or Independent Houses or Villas are allowed to mortgage under this category. The maximum tenure for this loan is 15 Years. Funding will be done to a maximum of 60% of the property cost of the sanctioned amount whichever is less. Banks ask customers to deposit the original Title deeds before disbursement only. Tax exemption is not applicable to this loan. Mortgaged property should have all the necessary permission from the competent authorities.

Plot Mortgage: Applicants who have plots and who wants to avail funds by making plots as equitable mortgage to the bank can choose this product. Banks reserves the right to ask for registered mortgage if needed. Funding will be done up to a maximum if 50% of the property cost or the sanctioned amount whichever is less. Tax exemption is not applicable to this loan.

Lease Rental Discount (LRD): This product is applicable only to those applicants who want to mortgage the property which they have leased to companies for commercial purposes. Banks will consider the rents that the customer is receiving every month from those properties. Maximum tenure will be less than the leased period over that property. Funding will be done to a maximum of 60% of the property cost or the sanctioned amount whichever is less. Customer has to mortgage the same property on which he is receiving rents. Banks will consider the rents which the customer is receiving through bank only.

Allowed combination's: All Banks do allow customers to go for more than one product at a time for fulfilling their needs. The allowed combination's of products are listed below.

Friday, April 23, 2010

Home loan is a product for which a customer needs to go through with the long process to get the loan for the desired property, for which the customer needs to do lot of ground work in terms of his/her profile to get accepted by the bank.

With the current financial markets being more volatile one should make a right move in the view of financial decisions. If you are taking a loan or you are planning for any insurance or any other financial product then please be aware of the financial terms and conditions of the bank. If you planned for any housing loan then take care of your basics which will affect the loan processing. Banks are very keen about the past history of the customer too.

Credit Information Bureau of India limited (CIBIL) is a service that provides the details of customers past records and accounts in association with all major banks in India.

Banks will take the CIBIL statements of applicants with their DOB, Pan Number, Driving license and passport number. A customer who applied for a home loan was rejected due to the written off of the credit card accounts in the co-applicants CIBIL statement which is a recent incident in a leading bank. Please be aware that in the current scenario getting a home loan or any financial product is tougher than before with the considerable changes in the processing.

Coming to the information in application form one should give only useful and appropriate information that will be a positive point to your home loan processing. Banks can take legal action if they feel any information given by the applicant is wrong and it was a trial of misleading the bank.

The second step of home loan processing is legal and technical evaluation of the property. Banks usually have panel advocates and technical valuers for the processing. The value given by the technical valuer is final and report given by the advocates gives the opinion on the legal status of the property. Customer should give the appropriate documents for this processing as it is important to get done for both people.

Last but not least is the processing of disbursement where customer should sign the documents of the bank and request for the disbursal of the loan applied for. Here the customer will be given with the details of the loan amount, EMI and tenure etc. Each and every customer is suggested to read the Home loan agreement which he need to sign to get the loan disbursal done in which bank narrates all the terms and conditions which a customer need to satisfy before and after taking the loan. Home loan is called as a life time contract so take wise decisions before going for it by reading all the documents and by asking the bankers to provide all the information about the loan which you are going to take.

Friday, April 9, 2010

Building a home of our dream is a life time achievement to a middle class person. For making this dream come true to a middle class person banks are playing a significant role by providing them with the right home loans at door steps. But if do not plan properly and if we are not aware of the policies, terms and conditions of the bank we will end up paying more to the bank in terms of principal and interest components.

For the convenience of our customers we planned to give a 10 steps plan which the customer has to understand to take a home loan to build a dream home of their life.

Please read these 10 steps of processing carefully and follow these to make the transaction a memorable moment in your life.

1. Understand your product

Before going for a home loan processing please be aware of your loan product and the terms and conditions that the Bank is asking to fulfil to have the loan done. There are different products for which bank is having different terms and conditions for each product. Normally the Bank will have the below products which come under home loans.

a. New Purchase of Flat or Independent House: In this a customer can purchase a New Flat or Independent house of his choice which is under construction or in ready to occupy position.

b. Resale purchase: This product is applicable to those customers who wants to go for a Flat or Independent house which was already owned by some body else.

C. Plot + Construction: The product is applicable to those customers who want to buy a Plot and do the construction immediately, but banks ask you to start the construction with in the specific period of time.

d. Balance Transfer (BT): A person who wants to transfer a loan from one Bank/Financial Institution to other can opt for this product.

e. Construction: A person who wants to construct a house in his/her plot can go for this loan.

f. Plot: A customer can go for this loan who wants to purchase a Plot which is under HUDA, Municipality and Grampanchayat limits.

g. Enhancement: Increasing the loan amount which was already taken from the same bank is called enhancement.

h. Top – Up: This loan is just a facility that banks provide to customers to take on the basis of the previous loan and the repayment track.

I. Mortgage: It is the loan that a customer can opt by depositing the original property documents with the bank which he already owns.

2. Rate of Interest (ROI): The most important point to be taken care of in taking a home loan. There are two types of home loan interest rates which banks normally have i.e Floating and Fixed.

Floating Rate of interest is subject to change according to the money market conditions. If the interest rate increases then the bank will increase the Rata of Interest on your loan vice versa.

Fixed Rate of Interest is fixed for the complete tenure of for over a period of time depending on the Banks, but Banks reserve the right to modify the rate of interest if they is any huge differences in the money market conditions.

Taking clear clarifications is suggestible to the customers about the fixed rate of interest if it is fixed for the whole tenure or not in spite of any differences in money market conditions.

3. Tenure or repayment period: A customer can choose the tenure of his own. Usually banks offer a min and max tenure of 1 to 25 years to home loans, and 1 to 15 years to mortgage loans.

Choose tenure of your own for flexible repayments of your loan by keeping all your income and liabilities in mind. It is always advised to choose less tenure to save the interest part on the Home Loan.

4. Eligibility and sanction process: By taking the Fixed and variable income into consideration banks will calculate the eligibility and the sanction will be given upon all the verifications being positive which the customer have specified in the application form. It is suggested to give useful and applicable information only.

Banks reserves the right to sanction or reject the application if they find any information that you have given is misleading.

Once you receive the sanction letter please read it carefully for the conditions of Interest rate revisions, Sanction conditions, Pre-closure charges, Processing fees and terms and conditions of the bank for availing the loan before signing it.

5. Legal documents and scrutiny: The customer is required to submit all the legal documents to the bank of the property which he is buying. The customer should ask the vendor to give all the link documents, Lay out, and plan copies along with his/her ownership documents.

It is to be taken care that if there is any legal disputes on the property then the proceeding and judgement copies are also required.

The customer should verify the legality of the property with a legal advisor because after clearing with the process of the bank if any legal issue raises in future the customer has to pay the loan and the bank do not take any responsibility about the legality of the property.

It is suggested to verify the legality of those pre approved ventures of the Bank for the safety purpose.

6. Technical evaluation: Banks evaluate the value of the property with their panel valuer and the value is final. The customers should take all security measures against the deviations like Horizontal and vertical which will affect the processing and the future transactions also. If any deviations are there with the property then you should ask the vendor for the copies of regularisation. The property should have the necessary permissions or documents to regularise the deviations according to Building regularisation scheme (BRS).

Please check all the details like Plot area, sanction area, Plot No and the Municipal Approved Plan Valid dates before going for a processing.

7. Home Loan Agreement: It is the Agreement which a customer has to sign before going for disbursement of the loan which he requested to the bank to fund on the property. Please read the document carefully before signing it as it is a long term contract between the customer and the Bank. Once you sign the document it can’t be altered or modified until and unless you repay the loan in all respects.

8. Registration: The most vital part of the Home Loan processing ends with the registration of the dream property for which you availed the loan. Please take care of the points typed in the Sale Deed documents which give you the ownership of the property and any small mistake in that leads to bigger controversies. So please read the Sale Deed documents before submitting it for the registration process.

The vendee should collect all the link documents, Plan copies and tax Paid receipts from the vendor at the time of registration only.

9. Processing, pre-payment and foreclosure charges: The customers have to pay the processing charges to the bank for the loan availed.

Depending on the banks some charge a max of 2% along with service tax for making part payments towards your home loan account and some do not charge for these payments, but there is a limit for making these part payments over a financial period.

The customer should know about the additional charges which bank will make in cases of pre payments and foreclosures. A customer needs to pay a max of 4 % of the outstanding principle along with service tax towards the foreclosure charges of the loan.

10. Tax exemption: Apart from giving the joy of a own house the home loan gives Tax exemption on the principal and interest paid over a financial period.

The Customer can get a tax benefit of Rs. 1,00,000/- maximum under section 80C of Income Tax act 1965. In addition to this you will get tax benefit of Rs. 20,000/- maximum on the principal amount repaid during a financial year under the section 88 of the principle repayment of the loan.

A customer can claim tax exemption for the amount paid as stamp duty during the registration process. The Bank will provide you with the provisional certificates to claim the tax exemption from the income Tax department. The loans which do not have tax exemptions are top-up, plot and Mortgage loans.